The Namibian Budget 2016/17 - 2018/19 Towards Pro- growth Fiscal - PowerPoint PPT Presentation

The Namibian Budget 2016/17 - 2018/19 “ Towards Pro- growth Fiscal Consolidation” House of Democracy 70-72 Frans Indongo Street Rowland Brown PO Box 22945 rowlandbrown@ean.org.na Windhoek 0816756401 Namibia committee@ean.org.na

OUTLINE • Why we pay tax • Macro backdrop • Revenue • Expenditure – Personnel – By vote – Development projects – Transfers to SOEs • Debt and deficit • Assessment • Budget process • Conclusions 16/03/2016 2

CURRENT RESPONSIBILITIES OF GOVERNMENT 1. Growth & Employment – Creating a sustainable and conducive environment in which jobs and wealth can be created for Namibians 2. International investment rating – Responsible use of public funds – Deficit containment – Debt and debt servicing cost containment – External position protection 3. Provision of key service infrastructure – Electricity, water, road, rail, etc. 4. Social support, poverty reduction and (sustainable) redistribution – Pensions, social grants, social safety net, reduced inequality 5. Housing – Access to housing 6. Education and Health – Provision of high quality education and health care The reasons we pay tax 16/03/2016 3

QUESTION: DOES THIS BUDGET ADDRESS THESE ISSUES? 16/03/2016 4

MACROECONOMIC BACKDROP • Been through a period of exceptionally strong growth. – Rebased from N$83bn economy to N$160bn economy in 6 years. – Driven by fiscal and monetary stimulus, and large FDI. – Resulted in construction and consumption boom. • Looking forward, outlook notably weaker – infrastructure constraints – The unwinding of historically low interest rates – lower levels of Government spending – less foreign direct investment into the country – fewer Angolan retail tourists – reduction in diamond output – weak commodity prices – drought – a high base. • Inflation • External position Previous pro-cyclical policy and now high debt levels and weak external position leave limited policy space for Government and BON Where to from here? 16/03/2016 5

REVENUE Where does the money come from? 16/03/2016 6

GDP FORECASTS 300,000 18.0% Nominal GDP 16.0% 14.2% 250,000 13.4% 14.0% 11.0% 12.1% 200,000 12.0% N$ Million 10.0% 150,000 8.0% 100,000 6.0% 4.0% 50,000 2.0% 0 0.0% 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 MOF IJG MOF Growth (RHS) IJG Growth (RHS) 16/03/2016 7

REVENUE • Total revenue revised down Revenue 80,000 to N$57.8bn, from N$63.1bn 70,000 • Main source of slowdown 60,000 lower SACU receipts. 50,000 • Growth expected to slow N$ Million almost across the board. 40,000 • Downward revisions for all 30,000 MTEF years, due to base. 20,000 • Expected fast recovery in 10,000 growth rate in 2017/18 and - 2018/19 • Forecasts thought to be ambitious given growth 2006 Budget 2007 Budget outlook. 2008 Budget 2009 Budget 2010 Budget 2011 Budget 2012 Budget 2013 Budget 2014 Budget 2015 Budget 2015 Mid-Term Budget 2016 Budget 16/03/2016 8

REVENUE BREAKDOWN Other revenue • Income tax remains largest 1.0 2% single revenue source, followed Non-tax revenue by VAT Income tax 3.6 on 6% Company – Critical for social contract individuals taxes 15.5 8.7 between tax payers and public 27% 15% officials. Revenue Breakdown • SACU contribution lower than 2016/17 normal due to N$3bn SACU repayment 14.1 VAT 24% • Other sources <25% of total 14.8 26% revenue. 16/03/2016 9

16/03/2016 Percent of GDP GOVERNMENT REVENUE AS % OF 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 - Montserrat Lesotho Congo, Republic of Angola Swaziland Botswana Zimbabwe Namibia GDP Mozambique Sweden New Zealand Belgium Finland Italy Liberia Govt Revenue to GDP Netherlands South Africa Zambia Rwanda Mauritius Kenya Tanzania Ghana Average Chile Egypt Malawi Senegal Uganda Spain Cote d'Ivoire Pakistan Canada Japan United States Germany China, P.R.: Mainland Brazil Nigeria Samoa 10

NEW REVENUE SOURCES “ Our focus is not only to broaden and deepen the tax base, but also to make the tax system more progressive, so that it contributes positively to the social objectives of reducing income inequalities” Calle Schlettwein, Budget Speech, March 2016 Government will: • finalize the approval and implementation process of an Environmental tax, and an Export tax to promote domestic value addition • increase the fuel levy • assess the feasibility of a presumptive tax on informal sector • develop the Double - Taxation Agreement Policy; • Look to reduce illicit trade flows and transfer pricing; • continue to finalize the consultation on the proposed Solidarity Tax; • Improve recovery of tax debts • deploy the new Integrated Tax System; and • implement transitional modalities for a Semi-Autonomous Revenue Agency. 16/03/2016 11

EXPENDITURE Where will the money go? 16/03/2016 12

EXPENDITURE • Notable expenditure Expenditure reduction. 80,000 – Down 1.1% between 2015/16 70,000 and 2016/17 60,000 – Down 7.4% when compared to previous budgeted number for 50,000 N$ Million 2016/17 40,000 • Major expenditure pick-up 30,000 again in 2017/18 and 2018/19 – However, last MTEF years rarely 20,000 play out as initially forecast. 10,000 • Huge escalation in spending - in past 6 years. – Funded by revenue windfall 2006 Budget 2007 Budget 2008 Budget and debt 2009 Budget 2010 Budget 2011 Budget 2012 Budget 2013 Budget 2014 Budget 2015 Budget 2015 Mid-Term Budget 2016 Budget 16/03/2016 13

SOURCE OF CUTS Budget Breakdown • Major cuts from the development 80,000 18% 16% 70,000 budget. 14% 60,000 12% N$ Million 50,000 – Slashed 18.3% when compared to 10% 40,000 8% 2015/16 and; 30,000 6% 20,000 – 27.9% when compared to previous 4% 10,000 2% levels for 2016/17. - 0% 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 • Development budget now makes Actual Actual Estimate Estimate Estimate Estimate Estimate up just 13.7% of total Operational Budget (2015) Devevelopment Budget (2015) Development as % total (RHS) expenditure, well below 20% N$ Million Estimate Estimate target. 2015/16 2016/17 Operational Budget (2015) 55,996 58,687 • Operational expenditure up 1.6% Development Budget (2015) 11,095 12,557 Total (2015) 67,092 71,244 over 2015/16 budget, but down Operational Budget (2016) 55,280 56,939 Development Budget (2016) 11,065 9,057 3.0% when compared to previous Total (2016) 66,345 65,996 Operational Change 2015-2016 Budgets (N$) (717) (1,748) budget figure for 2016/17 Development Change 2015-2016 Budgets (N$) (30) (3,500) Total Change 2015-2016 Budgets (N$) (747) (5,248) Operational Change 2015-2016 Budgets (%) -1.3% -3.0% Development Change 2015-2016 Budgets (%) -0.3% -27.9% Total Change 2015-2016 Budgets (%) -1.1% -7.4% 16/03/2016 14 Year on Year Change 12.7% -0.5% Development as % of Total 16.7% 13.7%

EXPENDITURE BREAKDOWN • Personnel costs larger than normal, Expenditure Breakdown at 38% of total expenditure. 100% 5% 5% 6% 7% • Subsidies and other current 9% 90% 11% 13% 10% transfers second larges item at 26% 12% 11% 7% 80% 8% – Made up of transfers to SOEs, social 7% 5% 4% grants, pensions etc. 70% • Goods and other services at 13%, 26% 26% 25% 27% 26% 60% and declining due to notable cuts 50% in: 13% 13% 14% 13% 14% 40% – Travel and Subsistence Allowance – Transport 30% – Training Courses, Symposiums and 20% 38% 37% 37% 37% 35% Workshops 10% – Furniture and Office Equipment • Interest and other borrowing costs 0% 2014/15 2015/16 2016/17 2017/18 2018/19 becoming significant, as debt stock Actual Revised Estimate Estimate Estimate increases, at 7%. Estimate • Leaves very little for development Other Acquisition of Capital Assets (DevB) projects. Interest Payments & Borrowing Charges Subsidies and Other Current Transfers Goods and Other Services Personnel Expenditure 16/03/2016 15

PERSONNEL EXPENDITURE Personnel Expenditure • Personnel expenditure seen 30,000 35.0% sizable increases since 30.0% 28.6% 25,000 2012/13 25.0% • Huge increases in 2013/14 and 20,000 Annual Change (5) 20.9% 2014/15. N$ Million 20.0% 15,000 – Part of effort to align civil 15.0% service wages to private sector 10,000 9.7% to attract in talent. 10.0% 8.1% 7.9% 7.3% • Upward revision in 2016/17, 5,000 5.0% from N$24.2bn to 25.1bn. 2.2% • Very ambitious growth target - 0.0% for 2017/18. Growth Rate (RHS) 2014 Budget 2015 Budget 2016 Budget 16/03/2016 16

WAGE BILL 250,000 35% • Wage bill growth driven by both Average Salary 30% 200,000 25% number of employees and 20% 150,000 N$ average wages 15% 100,000 10% • Average almost doubled from 5% 50,000 0% 2010 to 2016. - -5% 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 • Wage increases well ahead of inflation Average Salary Increase (RHS) Average Cost To Company Increase (RHS) Average Salary Average Cost To Company 120,000 Government Staffing 250,000 Average Namibian Government Wage vs Inflation Average Annual Wage (N$) 100,000 200,000 80,000 150,000 60,000 100,000 40,000 50,000 20,000 - Mar-10 Aug-10 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jan-16 - 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 16/03/2016 17 Funded Filled Inflation Suggested Average Wage Actual Average Wage